PublicInvest Research

Author: PublicInvest   |   Latest post: Fri, 4 Dec 2020, 10:06 AM


INNATURE - Strengthening Market Leadership

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InNature Bhd (INNATURE) is principally involved in the retailing and distribution of The Body Shop® (TBS) brand of products through its subsidiaries, who hold the TBS franchises in West Malaysia, Sabah and Labuan; Vietnam; and Cambodia. As at 31 Dec 2019, INNATURE has a total of 124 points-of-sale, besides having an online presence. The group's business garners customers from all walks of life, with the majority of its customers urban, young, and women. In collaboration with Natura Cosmeticos SA, INNATURE has also recently introduced the Natura beauty brand into Malaysia to expand its brand portfolio and strengthen its market share leadership in the naturals sector of the beauty industry. Apart from developing a new business with the Natura brand in Malaysia, INNATURE intends to drive TBS same-store sales growth in Malaysia while achieving greater market penetration in Vietnam and Cambodia post-IPO. We derive a fair value of RM0.77 based on a 15x PE multiple to its FY2020F EPS of 5.1sen which excludes the listing cost. The IPO is expected to raise approximately RM50.4m from the issuance of 74.1m new shares. Besides utilising 68.5% of the proceeds for capital expenditure, 11.3% of the proceeds are allocated for new business development, earmarking future growth.

  • Growth drivers. INNATURE’s growth will be dependent on: i) TBS same store sales growth in Malaysia, ii) TBS retail store network expansion and TBS brand awareness building in Vietnam, iii) TBS expansion in Cambodia, and iv) development of a new businesses with the Natura brand in Malaysia.
  • Competitive strengths. INNATURE’s competitive strengths include: i) being a leading mono-brand beauty retailer in Malaysia, ii) strong track record and long-term work relationship with The Body Shop International Limited, iii) TBS is a well-established global brand, iv) 100% vegetarian products, which are consumers' preference on the growing trend for natural beauty products, v) "masstige" positioning, and vi) strong base of loyal customers.
  • Catalysts. Key drivers may include: i) growing population and growth of disposable income, ii) increasing spending power by female consumers, iii) growth of the online market for cosmetics and personal care (CPC) products, iv) growing demand for natural-based ethically-sourced products and positive ethical consumerism behavior, v) growing demand for halal-compliant products among consumers, vi) growing market for prestige and “masstige” products, and vii) expanding personal care routines.
  • Key risks. Key downside risks, among others, include i) competitive environment, ii) dependency on the performance of economy and consumer spending patterns, iii) dependency on its ability to secure optimal locations and renewal of tenancies or leases, and iv) fluctuations in foreign exchange rates.

Source: PublicInvest Research - 6 Feb 2020

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Chart Stock Name Last Change Volume 
INNATURE 0.56 -0.015 (2.61%) 1,077,100 

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